Demonetization Likely Made India’s Data Centre Business the Second Biggest in APAC

It will likely touch $4.5B by 2018; demonetization had an adverse effect on many businesses, but for data center players, business has been good with demand still outstripping supply.

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Praveen Nair, general manager for Data Center Dynamics (DCD) in Mumbai writes: 

In November 2016, the Government of India announced it would demonetize the Rs 500 and Rs 1,000 banknotes of the Mahatma Gandhi Series. The bold move of swiftly taking the notes out of circulation set off a chain reaction of events that led to a period of uncertainty and chaos throughout the nation. Now that the dust has settled and life has returned to normal in most cities, we examine how data centers were central in ensuring that across the country, the average person could still go about their lives with minimal disruption.

Fast growth in digital

Since demonetization, government statistics say digital transactions have increased between 400 to 1000 percent with a huge growth in business from 52 crores to 191 crores. The surge in data traffic has in turn increased investment in data centers, with data center players increasing their data capabilities and capacities. The Internet & Mobile Association of India has estimated India’s data center business will touch 4.5 billion dollars by 2018, which makes it the second largest in the Asia Pacific region.

Srinivas Muppaneni, CIO of Andhra Pradesh State Cooperative Bank and Telangana State Cooperative Bank knows the importance of data centers especially post demonetization. He asserted, “Demonetization has forced many banks including ours to provide digital service in villages. For instance, post demonetization many villages in Telangana state have gone digital.”

The increase in digitization of the processes led to huge demand of storage especially from the BFSI (banking, financial services and insurance), telecom, and IT/ITES sectors. These sectors were unable to fulfill the sudden and huge demand of storage from their existing infrastructure and hence they were looking at data center providers. Muppaneni shared his bank’s experience. He said, “Being from the BFSI sector, post demonetization, we were worried whether our existing infrastructure would be able to handle the huge digital transactions or would our systems crash?”

Storage demands

Today, industries are looking at a place where massive amounts of data can be stored and utilized with security and efficiency. Hence it is crucial for today’s data centers to have the right storage, processing and security capabilities. But according to Muppaneni, data centers in India are not yet ready to handle the huge data traffic and there are very few data centers located in India. “Data centers in India are not yet ready to take up the increased data volumes and being from a BFSI sector, due to security norms, we cannot host our data in the data centers that do not have a physical presence in India. Hence localization of huge data centers with all the required storage, processing and security capabilities is vital,” he said.

Demonetization had an adverse effect on many businesses, but for data center players, business has been good as there has been an increase in data traffic, usage of network infrastructure and storage space. The data center players are realizing the importance of the Indian market and they are trying to fulfill the demand of Indian companies. However, demand is still outstripping supply.

Some experts in the industry have told us we are currently at a stage whereby the need for more data centers in India is a cause for concern. So what could be done? For starters, State Governments would do well to emulate the Telangana State Government by coming out with a data center policy which encourages more data centers to be set up by ensuring the entire process is free from bureaucratic red tape, and also ensuring the availability of power and connectivity. Existing data centers should be refurbished and upgraded, data center practitioners educated and trained with a comprehensive framework in mind and finally, data centers should be audited and certified to meet key standards.

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